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Menlo Park: Stanford, council negotiators strike deal for schools

Menlo Park council could approve two major Stanford projects tonight

A rendering of one of the retail and office buildings that would be part of Stanford's proposed "Middle Plaza" development at 500 El Camino Real. (Image courtesy Stanford University.)

In the eleventh hour, Stanford University and negotiators from the Menlo Park City Council have reached an agreement on what the university should provide to local schools as part of a development agreement for its proposed 429,000-square-foot housing, office and retail complex along El Camino Real.

The City Council could approve the complex tonight (Sept. 26) after a public hearing.

The university has committed to pay a lump sum of $1.5 million to the Menlo Park-Atherton Education Foundation, which supports the Menlo Park City School District. The funds would be provided one year after the last building permit is issued for the housing and office buildings and put into a foundation endowment.

The provision for the local schools is tied to the fact that Stanford plans to rent the 215 apartments to university faculty and staff, which means the university won't pay property taxes on the apartments. But children living in the apartments may go to the district's schools, which depend on property taxes for their operation. Stanford officials have pointed out that the development will generate taxes on its for-profit office buildings, which the university plans to lease to commercial tenants.

The university has also committed to pay for half the cost up to $5 million of a bicycle and pedestrian crossing over or under the Caltrain tracks at Middle Avenue. The maximum could be adjusted to reflect increases in the engineering cost index.

If the bicycle and pedestrian crossing costs less than $10 million and Stanford's $5 million offer is not maxed out, the remaining funds, up to $1 million, will be donated in a lump sum to the education foundation for its endowment.

The Stanford complex, which the university has named "Middle Plaza," includes a large privately owned but publicly accessible plaza. The plaza and the bicycle and pedestrian crossing over or under the tracks would be open to the public from 6 a.m. to midnight daily.

Council meeting tonight

Scheduled for the council's meeting tonight, Sept. 26, are:

• A public hearing on and possible approval of Stanford's "Middle Plaza" complex at 500 El Camino Real.

• A decision on whether the city should annex nearly 16 acres of unincorporated property the university owns and agree with Stanford's proposal to build a two-story office building of about 40,000 square feet at 2131 Sand Hill Road. (The 2131 Sand Hill Road project was brought to the council at the end of August for discussion, but was not approved.)

The 500 El Camino Real complex would be the largest development approved under the city's El Camino Real/downtown specific plan. The university proposes to build 215 apartments, 142,840 square feet of offices and 10,000 square feet of retail space on 8.4 acres along El Camino Real between Big 5 and the Stanford Park Hotel. The total square feet of 429,000 is slightly larger than the 420,000-square-foot Greenheart Land Co. mixed-use development at 1300 El Camino Real that the council approved in January.

The Sept. 26 council meeting starts at 7 p.m. in the Menlo Park council chambers at 701 Laurel St. in the Civic Center.

In a previous council discussion, Stanford was asked to consider developing or participating in a transportation management association for the proposed building at 2131 Sand Hill Road. Others, from the Sharon Oaks Homeowners' Association had asked that the university contribute toward rebuilding an old sound wall along Sand Hill Road, but university officials did not support the idea.

This agreement should not be approved until the city shows how much the services provided to Stanford by the City of Menlo Park will cost, how much any traffic mitigation needed due to Middle Plaza will cost, AND Stanford agrees to pay at least 75% of the ACTUAL costs of the bike/pedestrian tunnel. Otherwise, the City is getting a POOR deal. The City Council needs to show clearly why it would accept it. Residents deserve this information.

Posted by History Guy
a resident of Portola Valley: Brookside Park
on Sep 26, 2017 at 2:10 pm

I am confused by the claim that the private university, Stanford, would not pay property taxes on its property in Menlo Park. I thought the tax exclusion only pertained to religious institutions, not to non-public schools. Is this accurate?

Posted by Tim
a resident of Menlo Park: The Willows
on Sep 26, 2017 at 3:55 pm

@History Guy

The tax exclusion applies to any educational institution's property as long as that property is being used for educational purposes. That exclusion extends to housing for faculty and students since their purpose for living there is to further the education purpose of the institution.

As soon as the property is turned over to a non-education use, it become taxable property. However, I believe only the building basis of the tax applies. Stanford acquired the land so long ago, the land value is very low. Thus, the building is taxed at market rate at the time it is built, but the land is not.

This educational institution tax policy has the good intention of making it easier for colleges to financially exist in more expensive neighborhoods, but Stanford has perverted this policy.

Stanford is the largest private land owning non-government institution on the peninsula. It has billions of dollars in reserves and generates very high revenues. Moreover, rich donors add to its coffers every year. It does need the tax break when many of our government institutions do in order to service Stanford employees and students.

It can afford to sit on this empty land in perpetuity because it pays no taxes on it. A private speculator would be forced to pay yearly property taxes on it. When Stanford does build, it only pays property taxes on the building, but very minimal amount on the land. Since the land is never transferred ever again because Stanford never sells, the land basis property tax is never stepped up to market rates.

Basically, Stanford is using a tax loophole available to educational institutions, but acts as a private developer. It keeps all the profits, then lets its neighbors bear all the costs.

When the school districts come back in a few years with a parcel tax increase, you can thank Stanford since it isn't paying its fair share. It's even more galling because we, the people, have to make up the difference that Stanford does not.

I have previously proposed that Menlo Park eminent domain the property and sell it to the highest non-educational bidder. By selling it to the highest bidder, Menlo Park would legally fulfill its obligation of making Stanford whole. The private bidder could take Stanford's plans and construct the same buildings. In private hands, the land cost tax basis would step up and both buildings would be 100% taxable even if it was rented out to Stanford people. That would make the community whole and be fair.

Menlo Park turned down two development proposals from Stanford that complied with the current DSP zoning ordinance and now wants to "negotiate" on Stanford's third proposal. Why is anybody surprised that Stanford has lost patience with the city and decided to utilize its tax exempt status.

Posted by Council is outmatched
a resident of Menlo Park: Central Menlo Park
on Sep 26, 2017 at 5:43 pm

Our council is outwitted again. Stanford which one of the richest educational institutions in the world is tax exempt and will have their kids use the public schools which comes from our taxes. This is an opportunity to have them pay their share of what we all have to pay. 1.5 million is nothing. It just seems no one knows what they are doing in our council. At 215 apartments the 1.5 million comes to 6900 per unit. I know I pay more in property taxes than that yearly. Their 6900 is a one time fee. Honestly, we need direction and educated council members to get smart and stop this until they recognize 1.5 is nothing. At 215 apartments, say each unit has 2 children going to the schools, that would be 430 kids in our already overcrowded schools. I just cannot believe this the council sees as a victory. Just stupidity.